The Canadian Dollar (CAD) is experiencing a three-day sell-off, poised for its worst weekly performance in nearly a year. The US Dollar (USD) is rallying on higher US yields as markets reassess the timing and scale of Federal Reserve (Fed) easing.
Factors Fueling USD Strength
- Deteriorating Michigan Consumer Sentiment Index, though rising consumer inflation expectations, failed to dampen USD sentiment.
- Dovish ECB monetary policy statement further bolsters the USD.
- Boston Fed President Susan Collins hints at September for the start of rate cuts, signaling a potential delay and fewer cuts in 2024.
Market Movers and Outlook
- CAD’s weekly decline on track to be the worst since May 2023.
- University of Michigan sentiment data highlights weakening consumer sentiment but rising inflation expectations.
- US 10-year yields remain elevated near 4.5%, supporting USD.
- Market expectations for Fed rate cuts in 2024 have been scaled back significantly.
- Additional speeches from hawkish Fed officials could offer further USD support.
Technical Outlook: USD/CAD Bullish, Eyes Further Upside
The USD/CAD pair exhibits strong bullish momentum following a decisive break above a two-month channel. Overbought conditions exist but are not extreme. Key targets include:
- 1.3770 resistance
- Mid-November high of 1.3845 (measured target of broken channel)
Support Levels:
- 1.3680-1.3660
- 1.3545